Democrats rightly attack Republicans when the party's politicians and pundits perennially propose some fantastical, math-defying tax-cut plan that will slash government revenue but supposedly still not balloon deficits. During the presidential campaign, for instance, Democrats hammered Donald Trump for offering two wildly unrealistic proposals. One would have slashed federal tax revenue by a trillion bucks a year, the other a half trillion. This from the nominee of a party that not long ago was warning how skyrocketing government debt levels might ignite another financial crisis.
Were there some good ideas within those Trump blueprints? Absolutely. Lowering the corporate tax rate, allowing companies to immediately expense new capital investment, and broadening the tax base all individually have merit. But overall the plans were fatally defective because they avoided making hard choices or acknowledging necessary tradeoffs. In short, they were dreamy campaign documents that merited much mockery. Voters deserved better.
What tax cuts are to Republicans, single-payer health care seems to now be for Democrats: a popular, populist policy idea that's far more attractive in broad strokes than devilish details. Just take a look at Bernie Sanders' long-awaited Medicare-for-all legislation, introduced yesterday in the Senate. It's more like the Don't Worry, Everything's Pretty Much Covered Act of 2017. Just flash your Universal Medicare card, and you're entitled to generous — even compared to single-payer plans in other advanced economies — comprehensive health-care services: hospital care, doctor visits, mental health care, eye care, and more.
Would taxes go up? Well, yeah, of course. But why should Sanders kill the buzz by getting into all that unpleasantness? Recall that economists sharply criticized his presidential campaign's health-care plan for severely underestimating the costs of the comprehensive benefits it offered and thus underestimating the much higher taxes — maybe twice as high as Sanders estimated — needed to pay for it.
But that's hardly where the problems end for BernieCare. His plan would also phase out employer-provided health care. That, even though some 70 percent of workers in those plans say they're satisfied with their coverage. Sanders' plan would require millions of Americans to trade something that seems to be more or less working for them for something new and uncertain, both in coverage and cost.
In other words, the Sanders plan fails to recognize either political or economic reality, much in the same way Republican tax cutters frequently do. When a GOPer argues for "scrapping the tax code" despite all the long-term business investment and personal retirement plans built around it, that's ignoring real-world constraints. But ignoring constraints is what populists do the world over. They capitalize on economic dissatisfaction by promising economic salvation, as noted in the classic 1991 paper "The Macroeconomics of Populism" by Rudiger Dornbusch and Sebastian Edwards. From that research into Latin American economic failure:
Again and again, and in country after country, policymakers have embraced economic programs that rely heavily on the use of expansive fiscal and credit policies and overvalued currency to accelerate growth and redistribute income. In implementing these policies, there has usually been no concern for the existence of fiscal and foreign exchange constraints. … The final outcome of these experiments has generally been galloping inflation, crisis, and the collapse of the economic system. … The self-destructive feature of populism is particularly apparent from the stark decline in per capita income and real wages in the final days of these experiences. [The Macroeconomics of Populism]
The U.S. isn't near collapse. It's a wealthy and productive nation with the world's reserve currency. Things are actually going pretty well right now. Unemployment and inflation are low, while incomes are rising. Now is hardly time to gamble on risky, ill-considered populist schemes from the left or right, or even be distracted by them.
How about this instead: Stabilize ObamaCare. Reform the tax code to encourage more domestic investment. And do both in a bipartisan, fiscally responsible way. Then focus on preparing the American workforce for a technologically evolving economy. Call it Better Skills for All.
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